Presentation

Analyst

Okay, good morning. It's now pleasure to welcome our next speaker, Howard Willard, the Chief Financial Officer of Altria Group. Howard has been with Altria since 1992, holding several leadership positions including Executive Vice President, Strategy and business development.

Domestic tobacco category is in the process of evolving of course, and Altria has taken a leadership role with its now total tobacco strategy. We look forward to hearing Howard's insights as the landscape is being redefined by tighter regulatory oversight and rapid expansion into alternative tobacco products.

And with that, I will hand things over to Howard.

Howard Willard

Executive Vice President and Chief Financial Officer

Thank you, Mike and good morning, everyone.

Before we begin, please review the Safe Harbor statements in today's presentation and the forward-looking and cautionary statements section in today's press for a description of the various factors that could cause our actual results to differ materially from projections included today's remarks. Reconciliations and further explanation of a non-GAAP financial measures discussed today are available altria.com.

Today, we will focus on Altria's formula for creating shareholder value using our diverse business model and core strategies to achieve our long-term EPS and dividend goals. Murray Garnick, Senior Vice President and Associate General Counsel for Altria client services and Jim Dillard, Senior Vice President, Regulatory Affairs for Altria Client services are also with me today.

Following the presentation, we will all be available to answer your questions.

Our long-term goals are to grow adjusted diluted EPS at an average annual rate of 7% to 9% and to maintain a dividend payout ratio of approximately 80% of adjusted diluted EPS . These goals have guided us for the last several years and we are proud of the consistent results we have delivered. Altria's diverse business model and our core strategies help us achieve these goals. We will spend the balance of our presentation describing how our model and strategies help drive Altria's performance.

Our diverse business model sets us apart from other U.S. tobacco companies. Our tobacco operating companies own the leading premium brands in the largest and most profitable domestic tobacco categories, cigarettes, smokeless tobacco and machine-made large cigars.

With this total tobacco portfolio and focus on high-margin premium brands, Altria earned approximately 52% of the estimated, combined profit pool in 2012. While the dynamics in these categories are different, our positions across them have allowed us to consistently grow income in an evolving industry. We’re also very focused on continuing to develop new innovative products for adult tobacco consumers.

As the tobacco space continues to evolve and profitable, new categories emerge, we intend to use our capabilities to develop leading premium brands. Our rowing alcohol assets provide diversification outside of U.S. Tobacco and, historically, these assets have provided strong income growth. Our 27% economic interest in SABMiller allows us to participate in the estimated $32 billion global beer profit pool.

The adjusted earnings from our SABMiller stake have grown from $552 million in 2008 to $976 million in 2012, a compounded annual growth rate of 15.3%. Ste. Michelle Wine Estates is one of the fastest growing premium wine companies in the United States. Ste. Michelle has grown adjusted operating companies income from $73 million in 2009 to $104 million in 2012, a compounded annual growth rate of 12.5%.